[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
AN OVERVIEW OF DIVERSITY TRENDS IN
THE FINANCIAL SERVICES INDUSTRY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON DIVERSITY
AND INCLUSION
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 27, 2019
__________
Printed for the use of the Committee on Financial Services
Serial No. 116-4
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
_________
U.S. GOVERNMENT PUBLISHING OFFICE
35-693 PDF WASHINGTON : 2019
HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK McHENRY, North Carolina,
NYDIA M. VELAZQUEZ, New York Ranking Member
BRAD SHERMAN, California PETER T. KING, New York
GREGORY W. MEEKS, New York FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri BILL POSEY, Florida
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut ANN WAGNER, Missouri
BILL FOSTER, Illinois ANDY BARR, Kentucky
JOYCE BEATTY, Ohio SCOTT TIPTON, Colorado
DENNY HECK, Washington ROGER WILLIAMS, Texas
JUAN VARGAS, California FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas LEE M. ZELDIN, New York
AL LAWSON, Florida BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan WARREN DAVIDSON, Ohio
KATIE PORTER, California TED BUDD, North Carolina
CINDY AXNE, Iowa DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota
Charla Ouertatani, Staff Director
Subcommittee on Diversity and Inclusion
JOYCE BEATTY, Ohio, Chairwoman
WM. LACY CLAY, Missouri ANN WAGNER, Missouri, Ranking
AL GREEN, Texas Member
JOSH GOTTHEIMER, New Jersey FRANK D. LUCAS, Oklahoma
VICENTE GONZALEZ, Texas ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida TED BUDD, North Carolina
AYANNA PRESSLEY, Massachusetts DAVID KUSTOFF, Tennessee
TULSI GABBARD, Hawaii TREY HOLLINGSWORTH, Indiana
ALMA ADAMS, North Carolina ANTHONY GONZALEZ, Ohio, Vice
MADELEINE DEAN, Pennsylvania Ranking Member
SYLVIA GARCIA, Texas BRYAN STEIL, Wisconsin
DEAN PHILLIPS, Minnesota LANCE GOODEN, Texas
C O N T E N T S
----------
Page
Hearing held on:
February 27, 2019............................................ 1
Appendix:
February 27, 2019............................................ 25
WITNESSES
Wednesday, February 27, 2019
Garcia-Diaz, Daniel, Director, Financial Markets and Community
Investment, U.S. Government Accountability Office (GAO)........ 5
APPENDIX
Prepared statements:
Garcia-Diaz, Daniel.......................................... 26
Additional Material Submitted for the Record
Budd, Hon. Ted:
Electronic Transactions Association White Paper entitled,
``How FinTech is Addressing the Financial Needs of the
Underserved,'' dated January 2019.......................... 47
AN OVERVIEW OF DIVERSITY TRENDS IN
THE FINANCIAL SERVICES INDUSTRY
----------
Wednesday, February 27, 2019
U.S. House of Representatives,
Subcommittee on Diversity and Inclusion,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:05 p.m., in
room 2128, Rayburn House Office Building, Hon. Joyce Beatty
[chairwoman of the subcommittee] presiding.
Members present: Representatives Beatty, Clay, Green,
Gottheimer, Gonzalez of Texas, Lawson, Dean, Garcia, Phillips;
Wagner, Mooney, Budd, Hollingsworth, Gonzalez of Ohio, Steil,
and Gooden.
Ex officio present: Representatives Waters and McHenry.
Chairwoman Beatty. The Subcommittee on Diversity and
Inclusion will come to order. Today's hearing is entitled, ``An
Overview of Diversity Trends in the Financial Services
Industry.''
Without objection, the Chair is authorized to declare a
recess of the committee at any time. Also, without objection,
members of the full Financial Services Committee who are not
members of this subcommittee are authorized to participate in
today's hearing.
The subcommittee is meeting today pursuant to the notice to
hear testimony on an overview of diversity trends in the
financial services industry. I will now recognize myself for 5
minutes to give an opening statement.
To the Members, I would also like to advise you that votes
may be called around 2:20 or 2:30. We will proceed with opening
statements from myself, from Ranking Member Wagner, and 5
minutes to our witness, if time allows, before recessing for
votes.
Thank you for joining me today for this first historic
hearing of the newly established Subcommittee on Diversity and
Inclusion. I would like to take time to thank Ranking Member
Ann Wagner and the members of this committee for serving on the
Subcommittee for Diversity and Inclusion, which I am proud to
Chair.
Diversity and inclusion issues are important to me. Before
I came to Congress, I worked directly with government agencies,
nonprofits, and major corporations, including financial
institutions, on how to create more diverse workplaces. As
such, I understand the challenges that both industry and
government face in overcoming the obstacles that can prevent
the full inclusion of diverse populations. I am honored to
bring my experience on this issue to the committee.
Under the leadership of Chairwoman Waters, the Financial
Services Committee created this subcommittee to
institutionalize the consideration of diversity and inclusion
issues, create a forum for discussing diversity data and
trends, raise awareness, and review and assess how the
financial services industry maintains and grows their
inclusiveness of people of color, women, urban and rural
persons, persons of disability, LGBTQ, millennials, Native
Americans, and Active Duty servicemen and our Nation's
veterans.
It is no secret that the lack of diversity and inclusion in
our society leads to persistent income inequities and also
growing the wealth gap, which we are prepared to explore.
Now, let us look at some statistics. According to the U.S.
Census Bureau, within the next 25 years more than half of all
Americans are expected to belong to a minority group.
Additionally, the Equal Employment Opportunity Commission,
commonly known as the EEOC, reported in 2013 that while women
represent 53.2 percent of the professionals, they make up only
about 38.6 percent of employees at the management level.
The EEOC also reported in 2013 that although African
Americans and Hispanics collectively represent almost half of
the service workers and laborers industries, they are
disproportionately underrepresented in the professional and
management ranks.
A larger, more diverse talent pool should lead to a more
diverse workforce, and yet, despite increased awareness of the
business importance of diversity in the workplace and elsewhere
in society, troubling disparities persist that affect
recruitment, retention, and promotion.
These disparities are very pronounced in the financial
services industry in particular, as today's hearing and our
witness' testimony will demonstrate. For instance, according to
the U.S. Government Accountability Office (GAO), from 2007 to
2015, the percentage of African-American managers in the
financial services industry decreased from an already low 6.5
percent to 6.3 percent and remained largely unchanged for women
at 45 percent.
As I look around this room, we are representative of
different cultures, different regions of the country, and
different views. As the Noble Laureate Maya Angelou has
appropriately famously quoted, and I paraphrase, in diversity
there is beauty and there is strength. We should know that
diversity makes for a rich tapestry, and we must understand
that all threads of that tapestry are equal in value, no matter
their color.
During the course of this Congress, we will analyze
diversity and inclusion trends and data, exercise oversight of
what regulators and industries are doing in this space,
highlight best practices, and consider legislation that may be
needed to change the culture in government and industry, and
move the needle in a positive direction on the issues of
diversity and inclusion in our Nation.
Numerous studies have proven empirically that diversity
increases productivity and the bottom line. Yet, the data on
diversity and inclusion efforts in our Nation's industries and
government are not aligned. We need to find out why and we need
to fix it now.
I look forward to working with all of the members of this
committee in a bipartisan manner and conducting this
subcommittee with civility and respect for all members.
Now, I would like to say, welcome to the Subcommittee on
Diversity and Inclusion. I look forward to hearing the
testimony of today's witness, Mr. Daniel Garcia-Diaz, who
serves as Director in GAO's Financial Markets and Community
Investment team, and is an expert in analyzing and assessing
diversity and inclusion.
The Chair now recognizes the ranking member of the
subcommittee, the gentlewoman from Missouri, Mrs. Wagner, for 4
minutes for an opening statement.
Mrs. Wagner. Thank you so much, Madam Chairwoman. It is an
honor to be with you this afternoon, holding the inaugural
hearing of this new, very important subcommittee. I look
forward to working with you and Chairwoman Waters as we examine
how best to promote diversity and inclusion in the financial
services industry.
Women and minorities are growing their numbers and securing
leadership positions on Main Street, Wall Street, and as
elected officials. However, there is still much work to be done
to ensure the financial industry, along with many other sectors
of the U.S. economy, is reaping the benefits of our country's
diversity.
While we need more data and information, research shows
that diversity and inclusion can bring both social and economic
benefits to the workplace. A study by the Milken Institute
found that diversity in the composition of organizational
groups affects outcomes such as turnover and performance.
Several studies have revealed a connection between greater
diversity and enhanced financial returns. Further, corporate
scandals are less common on boards where women and minorities
are represented.
This subcommittee's jurisdiction includes overseeing the
effectiveness of the Offices of Minority and Women Inclusion,
known as OMWIs, at Federal financial services agencies. Earlier
this month, I contacted the eight regulatory agencies with
Offices of Minority and Women Inclusion to further understand
agency efforts to increase diversity and inclusion.
Today, I do want to welcome Daniel Garcia-Diaz, who
authored a November 2017 GAO report examining diversity in the
financial services sector.
We thank you, Daniel, for taking the time to share your
results with us.
The findings of the report show that industries' good
intentions are not necessarily resulting in increased diversity
across the sector. This is an issue across the American
economy, from the technology industry to the media.
While there is no question that companies are committed to
providing opportunity for all employees, and there are many
success stories, the report demonstrates that the overall level
of diversity within the industry did not significantly improve
from 2007 to 2015.
After reading this report, it is clear that recruitment and
retention are the primary challenges that companies face as
they try to address diversity in their ranks. Talent among
those with diverse backgrounds is equal, but we must do more to
promote equality of opportunity.
The financial services industry, led first by OMWIs, can
find ways to better seek out and train promising diverse
candidates at first-, mid-, and senior-level career stages.
Opportunity starts early, as we have seen in STEM-related
professions. It starts early with education and finding ways to
attract high school students and undergraduate and graduate
students to careers in the financial services sector.
I so look forward to working with my friend, Chairwoman
Beatty, on these twofold initiatives: ensuring that the
financial services industry is benefiting from America's
diversity; and ensuring that people from diverse backgrounds
and all socioeconomic levels have the resources, access, and
pathways to benefit from our robust financial services
industry, an industry that has improved the quality of life for
so many Americans.
I thank you all for coming to this inaugural Diversity and
Inclusion Subcommittee hearing.
And I thank you, Director Garcia-Diaz, for your testimony
this morning.
I yield back.
Chairwoman Beatty. Thank you.
The Chair now recognizes the ranking member of the full
Financial Services Committee, Mr. McHenry, for 1 minute.
Mr. McHenry. Thank you, Madam Chairwoman, and thank you for
your leadership.
I also want to thank the ranking member of the
subcommittee, Ann Wagner, who is the Full Committee vice
ranking member as well, for her leadership and commitment to
this important issue.
I support Chairwoman Waters' decision to create this new
subcommittee, and I continue to support her work on the issues
facing diversity and inclusion in the financial services
sector.
Additionally, I want to commend Ranking Member Wagner for
her diligence on this issue and leadership. Two weeks ago, the
ranking member sent letters to all the Offices of Minority and
Women Inclusion, better known as OMWIs, at the regulatory
agencies to better understand their actions on diversity. The
responses from these letters and the information gleaned from
this hearing will help this subcommittee identify the
appropriate role of Congress on a going-forward basis to
facilitate greater diversity in the industry and at regulatory
agencies.
I look forward to the hearing, and I certainly appreciate
all the work that the GAO does in a disciplined study at the
direction of Congress.
Chairwoman Beatty. The Chair now recognizes the chairwoman
of the full Financial Services Committee, Chairwoman Waters,
for 1 minute.
Chairwoman Waters. Thank you very much, Madam Chairwoman.
Today, we are convening for the first time the Subcommittee
on Diversity and Inclusion, which will examine and resolve the
systemic economic exclusion of women, people of color, persons
with disabilities, LGBTQ-plus individuals, veterans, and other
members of our society who have to fight for a seat at the
table.
I am pleased that the subcommittee is beginning with this
hearing on an issue that has stymied the financial services
industry: including women and minorities in management.
Beginning in February of 2005, 14 years ago, the Financial
Services Committee requested that the GAO review diversity
trends in the financial services industry. In 2006, GAO looked
at diversity from 1993 to 2004 and reported that the
percentages of minorities in management rose from 11.1 percent
to 15.5 percent, with the percentage of African Americans
rising from 5.6 percent to 6.6 percent.
GAO has since updated its report several times. In GAO's
most recent report covering 2007 to 2015, minority
representation increased from 17 percent to 21 percent.
However, the percentage of African Americans in senior roles
decreased from 6.5 to 6.3 percent, and all minorities continued
to be underrepresented.
For years, policymakers, diversity advocates, and diversity
professionals in the financial services industry have sent the
message that diversity and inclusion must be more than words.
They require action and resolve. Unfortunately, the data shows
that the financial services industry lacks both today.
This subcommittee begins the process of shining light on
these trends and begins its work to improve the industry so
that our financial system works for everybody.
And I am so pleased that Mrs. Beatty has taken the
leadership on this Diversity Subcommittee. There is nobody, no
one else who could do the job better than she can.
I yield back the balance of my time.
Chairwoman Beatty. Thank you.
Today, we will welcome the testimony of Daniel Garcia-Diaz.
Mr. Garcia-Diaz is Director of Financial Markets and Community
Investment at the United States Government Accountability
Office (GAO). He is also the author of the GAO report, ``Trends
in Management Representation of Minorities and Women and
Diversity Practices, 2007-2015.''
The witness is reminded that his oral testimony will be
limited to 5 minutes. And without objection, his written
statement will be made a part of the record. The witness is
reminded to turn on his microphone and abide by the three
lights in front of him: green means go; yellow means wrap it
up; and red means stop.
Mr. Garcia, you are now recognized for 5 minutes to give an
oral presentation of your testimony.
STATEMENT OF DANIEL GARCIA-DIAZ, DIRECTOR, FINANCIAL MARKETS
AND COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
(GAO)
Mr. Garcia-Diaz. Chairwoman Beatty, Ranking Member Wagner,
and members of the subcommittee, thank you so much for the
opportunity to be here today to discuss GAO's work on trends in
workforce diversity in the financial services industry. I am
especially pleased to be participating in the first hearing of
the newly established Subcommittee on Diversity and Inclusion.
Over the years, GAO has worked with the Financial Services
Committee to share information on the extent that minorities
and women are making headway in the financial services
industry, particularly at the management level.
My statement today draws from our most recent report,
issued in November 2017. Specifically, I will focus on trends
in minority and women representation among managers in
financial firms from 2007 through 2015, and practices these
firms have identified to address challenges in increasing
diversity.
Unfortunately, the trends are clear: Management-level
representation of minorities and women showed marginal to no
increase from 2007 through 2015.
The situation is more worrying when we look at
representation at the senior level. Specifically, minority
representation increased from about 11 percent to 12 percent in
this period. In addition, African-American representation
decreased not only in percentage terms, but also in absolute
numbers.
Among first- and mid-level managers, that is just right
below the senior level, minority representation increased from
19 to 22 percent in this period.
When we look at women representation, we found that it
remained unchanged at the senior level, at around 30 percent.
However, women representation was much stronger among first-
and mid-level managers, at almost 48 percent.
We also looked at representation by different sectors
within the financial services, and generally banks and lenders
had greater representation of minorities than the other
sectors, such as insurance and securities. In fact, the
insurance sector lagged banks by almost 3.5 percentage points.
Women representation in management tended to be the highest
in the insurance sector. The security sector tended to have the
lowest level of women representation.
For today's hearing, my team examined EEOC data for 2016,
the most recent available at this time, and we observed little
or no change since 2015 across many of these measures for
minorities. And we also noticed some growth in women
representation among first- and mid-level managers.
Many firms recognize that an inclusive workforce can help
attract the best and the brightest and can contribute to
innovation in products and services. But simple aspiration for
achieving a diverse workforce is not enough. Diversity
management requires intentional and strategic action that is
sustained over the long haul.
For this reason, we consulted with financial firms,
industry groups, and others to understand the types of
practices that they have identified to improve upon current
trends. We consistently heard from experts that firms should
engage in broad-based recruitment. In other words, firms need
to cast their nets wider and not limit themselves to the same
schools and the same academic disciplines.
In addition, establishing mechanisms to hold managers
accountable can help firms move towards their workforce
diversity goals. As we have noted in our past work, leadership
commitment to diversity is essential, but experts tell us that
middle managers may not be as committed as leadership.
Accountability measures to ensure that leaderships' and
managers' efforts are aligned can be established in a variety
of ways. For example, one firm representative stated that
linking managers' compensation to diversity goals has been an
effective practice for retaining women and minorities.
Establishing such accountability measures could help ensure
that leadership's vision is carried out.
Finally, firms and stakeholders we met with agreed that
data analysis to assess the diversity of their workforce and
spotting potential bottlenecks and problems is a key part of
effectively managing workforce diversity.
Before I conclude, I would like to highlight for the
subcommittee GAO's completed and ongoing work in this area. We
have issued eight reports related to diversity in the financial
sector. We also have completed a recent report on Board
diversity at the Federal Home Loan Banks and are currently
examining the diversity of these banks' workforce and business
activities. Building on this wealth of experience, we look
forward to assisting the subcommittee.
This concludes my opening remarks. Thank you again for the
opportunity to speak today, and I will be glad to answer any
questions you have.
[The prepared statement of Director Garcia-Diaz can be
found on page 26 of the appendix.]
Chairwoman Beatty. Thank you, Mr. Garcia-Diaz.
I now recognize myself for 5 minutes for questions.
Mr. Garcia-Diaz, I have a series of questions, but to get
through my 5-minute time period, I am going to reference a
study. The 2015 international management consultancy firm
McKinsey & Company first published a report entitled,
``Diversity Matters,'' which makes the business case for
diversity. That report has since been updated, and the most
recent version was published just in January of 2018, entitled,
``Delivering Through Diversity.''
The most recent report used a dataset of over 1,000
companies in 12 different countries, using two measures of
financial performance: earnings before interest and taxes to
measure profitability and economic profit margin to measure
value creation.
This data was used in a combination of diversity and
inclusion efforts of 17 companies from around the globe to
study where diversity matters most and how leading companies
have used it successfully.
Are you familiar with this report?
Mr. Garcia-Diaz. With the body of work that McKinsey has
done, yes, and it seems to build on what we have seen in the
past. But this particular report, no, I have not evaluated it.
Chairwoman Beatty. So let me give you a little more data
before I ask you to respond.
The report found that companies in the 25 percent for
executive-level gender diversity were 21 percent more likely to
outperform on profitability and 27 percent more likely to have
superior value creation.
Additionally, the report found that companies in the top 25
percent for executive-level ethnic and cultural diversity were
33 percent more likely to have industry leading profitability.
Conversely, the report found that the less diverse
executive teams were 29 percent less likely to achieve above-
average profitability.
In your report, there is a section on research on potential
benefits of workforce diversity, and I believe it is on page 7.
Can you briefly discuss your findings in that section and how
they support the findings that I gave you in the McKinsey
study?
Mr. Garcia-Diaz. We scanned the literature for the 2017
report and generally found studies that certainly support the
idea that a more diverse culture at a firm can contribute to
product innovation, idea generation in groups. It also can
contribute to higher levels of satisfaction at work, which of
course can be correlated with better performance.
In terms of the association between diversity and financial
performance, for the studies we looked at there have been
attempts to make an association. Often, the challenge with
those studies is the causation part. It may be correlated, but
we don't know the direction of causality.
But, again, generally there is a consistent story that is
being conveyed through these studies that financial performance
can be positively impacted by a diverse workforce. But of
course that is an area where I would say that continued study
and research would be needed to really pin these issues down.
Chairwoman Beatty. Okay. Thank you.
As you know, in our larger Committee on Financial Services,
we deal a lot with banks and credit unions and securities and
other activities, insurance and funds and trusts. In your
report, you provided a breakdown of financial services
industries in those same sectors.
There was also some alarming data of decreasing numbers,
and you can pick a minority group, whether it is women, whether
it is African Americans, or whether it is Hispanics.
Did the GAO explore some of these trends in the data and
why they exist? Or can you tell me if there are specific
diversity management practices that could help us address these
discrepancies?
Mr. Garcia-Diaz. Yes. The challenges with the data that we
are working with from EEOC is it is hard to figure out what is
going on behind the numbers. So we did consult with experts in
the field and industry representatives and firms to get an idea
of what is going on. And some of the issues that we heard are
certainly kind of, if you have been working in diversity and
inclusion issues for a while, sort of the same set of issues
are behind it.
One thing I would just highlight in the few seconds here is
that one thing maybe that we heard was the impact of the
financial crisis having on the trends in diversity, and in
particular, firms' ability to continue some of the efforts they
had in place prior to the financial crisis, to ensure that
there were adequate recruitment and retainment efforts and
seeing through the promotion process to higher levels of
management.
Chairwoman Beatty. Thank you.
I now recognize the gentlewoman from Missouri, the ranking
member of the subcommittee, Mrs. Wagner, for 5 minutes.
Mrs. Wagner. I thank the Chair.
Mr. Garcia-Diaz, it is important to understand, I think,
the data in your report. Can you tell me briefly, how do you
define diversity for the purposes of your report? And what were
the parameters that you identified? Are those consistent with
other diversity and inclusion evaluations?
Mr. Garcia-Diaz. Yes. So diversity is actually a very broad
concept. It can include racial and ethnic characteristics,
male/female. Those were the ones that we focused on in this
study in particular, because that is what was available in the
data.
When we think about diversity and inclusion, these are
certainly very important components of it, these
characteristics, these dimensions, but not the only ones. So
when we think about diversity, we need to think about diversity
in veteran status, age, and things like that. And that is the
way we at least envision it.
There is no one picture of what a diverse organization
looks like. If you can imagine a credit union in Maine versus a
global bank in New York City, diversity might be interpreted
differently in those situations.
Mrs. Wagner. There is a need to do, I think, outreach and
education in STEM at the undergraduate level.
A 2018 Bloomberg article cited testimony from the founder
of the Women in Technology and Entrepreneurship in New York,
Judith Spitz, who was the CIO of Verizon. And Ms. Spitz stated
that their research showed that although there are increasingly
higher numbers of women in undergraduate institutions, there
are only about 1 percent of them who are studying, for
instance, computer science. Computer sciences and similar
disciplines are becoming increasingly crucial to the financial
services sector.
I believe this is a major impediment when it comes to
gender diversity in the financial sector. How do you suggest we
remedy this situation?
Mr. Garcia-Diaz. That certainly speaks to the original kind
of pipeline of potential candidates that you have to apply for
a financial services job.
And as the industry has moved to look at other programs
beyond MBAs, but looking at math programs, engineering
programs, there is this balancing concern, that while you may
be getting disciplinary diversity, you are not necessarily
getting, for example, gender diversity, particularly because in
some of the sciences, math, and engineering, it tends to skew
towards male representation.
Mrs. Wagner. Our subcommittee is striving to promote
increased diversity and inclusion in the financial services
sector. There are two ways, I think, that this can be
accomplished, through punishment or through incentives, the
carrot and the stick notion, so to speak.
Your research has spoken to the advantages of incentives.
Why do you think the current set of incentives is not really
working?
Mr. Garcia-Diaz. Well, I think there has been over the
years a shift from this notion of diversity is the right thing
to do, we need to do more of it. But how do you make that
compelling and incentivize that behavior for managers to
promote diversity at all levels of their organization?
So I think this is where the business case argument or
framework comes into play, where you find real business reasons
why diversity contributes not only to the bottom line, but to
the well-being of the organization, employee satisfaction, and
things like that.
Once you have achieved an organization that is inclusive of
people of different backgrounds, race, religion, and so on,
ultimately that makes it more inviting for candidates to apply
for those types of jobs and you get this virtuous cycle going
that according, at least, to some of the conversations we have
had with experts, doesn't necessarily exist right now in the
financial services.
Mrs. Wagner. Any specific incentives that have been proven
to increase diversity in these financial firms, do you think?
Mr. Garcia-Diaz. It is one of those things where I wish I
could say that there are two or three things. But when we talk
to the experts, they have to try all different methods--
Mrs. Wagner. We talked about flex time. We talked about
lifestyle issues, mentorship. I have gone through your GAO
study, and do any of those kinds of things come to mind?
Mr. Garcia-Diaz. Yes. Our work highlights, actually, things
like mentorship, outreach to the community and schools to
introduce students to the financial services, that it is a
viable career path.
Mrs. Wagner. We see that in STEM quite a bit, but we would
love to see that more so in the financial services sector.
Mr. Garcia-Diaz. I think a lot more can happen in that
space. And, again, if you take my comment earlier that had some
of those efforts slowed down since the financial crisis, then
it would be a useful area for a lot of firms to focus on.
Mrs. Wagner. My time has expired. I yield back.
Chairwoman Beatty. Thank you.
The gentleman from Texas, Mr. Green, the chairman of our
Subcommittee on Oversight and Investigations, is now recognized
for 5 minutes.
Mr. Green. Thank you, Madam Chairwoman. I am so honored to
be a part of this subcommittee. I am especially honored because
you are the chairperson and you have always been involved with
the committees with which I have been associated. And I wanted
to make sure that I was here today to be a part of this
historic meeting. This is unprecedented, and I am proud and
honored to be associated with this subcommittee.
Let me quickly indicate that I believe the tone and tenor
are set by the persons at the top. And if you have a diversity
mentality, you are likely to understand recruitment and
retention. You are likely to understand unconscious bias. You
are likely to understand why you have to intentionally move
forward in your recruiting efforts to acquire and maintain
diversity. And you understand that it is important to train
your managers and your employees about inclusion and
unconscious bias.
So let me just ask this question, if I may. Have we, in our
efforts to diversify, placed emphasis on bonuses for the people
at the top who can cause diversity to be reflected throughout
the organization? Bonuses.
Mr. Garcia-Diaz. Yes. And I think you are touching on
issues that we have highlighted as critical, not only the
leadership commitment to diversity, but to begin to set those
goals and priorities for the whole organization. Then, how do
you carry that out? How do you ensure that people are taking
actions to address that?
In our 2017 report, we reiterated here in the testimony is
the issue of introducing accountability for middle managers, to
ensure that they are living up to this vision, which includes
linking managers' performance at meeting diversity goals to
their compensation. That would be one method, for instance.
Mr. Green. And to what extent is this being done throughout
the industry?
Mr. Garcia-Diaz. We don't have data on that. It is strictly
at this point anecdotal, what we have heard, that some firms
are doing this. If it is widespread, we just don't have the
data on that.
Mr. Green. And have you found in your research that where
it is implemented, you get greater results, better results?
Mr. Garcia-Diaz. Yes. And so for the firms that did report
using, they thought it did actually contribute positively to
their ability to not only recruit but also retain talented
minorities and women.
Mr. Green. And is it true that you found--I think you have
said as much, but I will just ask and then I am going to yield
back because I know that time is of the essence--that when you
have a person who intentionally, who is at the top, who
intentionally wants to recruit and diversify, that you get
greater results?
It seems that the answer would be a simple ``yes,'' but I
would like it for the record.
Mr. Garcia-Diaz. Yes. It is a simple answer. Yes, that is a
practice that in our interviews with experts and researchers
have identified that it needs to be intentional.
Mr. Green. So the reverse of that would be then that if you
find places where you don't have the balance that we seek, the
diversity, there is a good likelihood that someone at the top
is not emphasizing it appropriately.
Mr. Garcia-Diaz. That is one possibility.
Mr. Green. I thank you.
Madam Chairwoman, I will yield back, because I understand
time is of the essence.
Chairwoman Beatty. Thank you. The gentleman yields back.
To the Members, votes have been called on the Floor, so the
committee will pause for votes and resume immediately after
votes. The committee stands in recess.
[recess]
Chairwoman Beatty. The committee will come to order.
The gentleman from Ohio, Mr. Gonzalez, is now recognized
for 5 minutes.
Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman.
Let me first start by saying how much I am looking forward
to working with my fellow Buckeye, Chairwoman Beatty, and also
Ranking Member Wagner on this subcommittee. In my short time in
Congress, I have learned that these two women have an unmatched
commitment to improving the lives of their constituents and are
both excellent choices to lead this subcommittee.
Mrs. Beatty, in particular, I have followed for many years
and know that this important issue is one that she has been
championing in my home State, and I look forward to working
with her on helping make Ohio a shining example of a diverse
and inclusive financial sector and workforce.
Lastly, I want to thank Chairwoman Beatty and Ranking
Member Wagner for starting this subcommittee in what I consider
to be exactly the right place, which is a thorough review of
what the data tells us about our present situation. I think we
start with data, we start with an open, honest dialogue about
what our current position is, how we got here, what the trends
are. And then, as we are grounded in data, we consider
policies, their effects positively or negatively, and how that
will stay foremost in our mind.
So I think that is an excellent way to start, and I thank
both of you for that leadership.
I am proud of two great examples in Ohio, one is KeyBank,
headquartered right outside my district in Cleveland, Ohio.
They have received the designation as one of DiversityInc.'s
Top 50 Companies for Diversity, having a board of directors
that is 50 percent diverse by gender and race. This includes
implementing a mentor program for senior and junior employees,
focusing on holistic benefits packages, and training management
employees in unconscious bias.
Huntington Bank, also headquartered in Ohio, has also made
tremendous strides in diversity. In 2018, Huntington invested
$142 million in the economic success of diverse businesses.
Huntington is also committed to encouraging a diverse
workforce, with a board of directors that is 30 percent
diverse, a senior management team that is 42 percent diverse,
and a total workforce that is 64 percent diverse.
The progress made at Key and Huntington show that the
industry has made strides forward, although I recognize that
there is certainly much work to be done.
So, Mr. Garcia-Diaz, first, I want to thank you for waiting
out our votes, and everybody else who stuck around. I think the
data that you presented is obviously important data, and what
we have seen today is primarily aggregate data.
When you drill down into regions, subregions, different
sectors of the industry, are there certain areas where we are
seeing bright spots that we can be excited about, that we can
say, hey, this area or this part of the industry is doing a
really good job on this front and maybe we need to kind of
study them a little bit?
Mr. Garcia-Diaz. Yes. If you look at the data even in our
2017 report--we actually have an appendix that goes down to
State-level reporting, not just national--you see actually a
dramatic variance across States. And that shouldn't surprise
us. So you can look at California and Florida, and they have
obviously a large Hispanic population, and as a result you do
see higher than average.
Mr. Gonzalez of Ohio. Did you control for that in the data
at all?
Mr. Garcia-Diaz. No. We are just reporting--we are not
doing an econometric kind of analysis where we are controlling
for other features. It is more of descriptive statistics.
Mr. Gonzalez of Ohio. Okay.
Mr. Garcia-Diaz. But I think that is an area that does
provide actually some good areas for future work, to look at
that kind of variation not only across region but types of
industries.
Mr. Gonzalez of Ohio. Okay. Great.
And then a second question, kind of in the same vein. When
this has been done well and when folks have kind of achieved
meaningful outcomes in diversity, what best practices are you
seeing, or did you not go into that much in the reporting?
Mr. Garcia-Diaz. We did consult with firms and industry
groups to identify what seemed to be promising practices. You
mentioned some of them in your remarks. Those include mentoring
programs. We also, to add to some of the items that you
mentioned, family-friendly policies are especially is useful
for women to be able to stay in the organization long enough so
that they can get promoted to the higher levels.
Mr. Gonzalez of Ohio. Great. Thank you.
And I yield back the balance of my time.
Chairwoman Beatty. Thank you.
The gentlewoman from California, the chairwoman of our full
Financial Services Committee, is now recognized for 5 minutes.
Chairwoman Waters. Thank you very much, Madam Chairwoman.
I do have a question that I would like to raise about
recruiting. Mr. Garcia-Diaz, since 2005 this committee has
asked the GAO to review diversity in the financial services
industry. In multiple reports, GAO has continued to emphasize
that, and I quote: ``Without a sustained commitment among
financial services firms to overcoming challenges to recruiting
and retaining minority candidates, limited progress will be
possible in fostering a more diverse workplace.''
Unfortunately, GAO's conclusions are correct.
Now, what barriers, if any, exist that prevent financial
services firms from increasing minority recruitment? What more
could financial services firms do to improve their recruitment
practices? What can Congress do to hold them accountable?
Mr. Garcia-Diaz. In order to make that recruitment more
effective than it has been, financial services institutions
need to look beyond their traditional sources of talent--and we
identified just looking beyond the typical schools, academic
programs, and things like that--to identify new sources of
diverse candidates for their recruitment.
In addition, firms can do more in terms of reaching out to
the communities, to schools, to get students and potential
candidates connected and realize that this is a potential
career path for them and to start that process of stimulating
interest in the industry.
Chairwoman Waters. I think you have indicated in your
report that the talent pools from which financial services
firms could hire individuals are diverse. Specifically, you
found that one-third of the persons obtaining graduate or
undergraduate degrees between 2011 and 2015 were racially or
ethnically diverse. However, this level of diversity is not at
all reflected in the financial services industry.
Many of them tell us they go to the colleges and
universities and they are all telling us they go to Georgia and
they are recruiting, but it is not reflected in their pool of
workers. So what is happening between the time that they
recruit, so-called, and the fact that they are not hired and
they don't show up in their workplace? What do you think
happens?
Mr. Garcia-Diaz. Well, there is the other problem. Even if
you are doing the recruitment in the right area, if the
candidates are looking at the firm and they are finding that
the firm is not as diverse as it could be, that itself can act
as a barrier.
And so whenever we look at any of these approaches, it is
not just one thing. It is not just go to one school and try to
recruit there. It has to be a combination approach which
includes more extensive outreach and education about what they
do for those students, because the academic programs that we
have nationwide are extremely diverse.
Minority candidates and women are not hiding. They are out
there. They are available. But a lot of times it is making the
case, and making it convincing, that this is a possibility for
them.
Chairwoman Waters. Can you think of any incentives?
Mr. Garcia-Diaz. I'm sorry?
Chairwoman Waters. Can you think of any incentives?
Mr. Garcia-Diaz. For?
Chairwoman Waters. Incentives that could be offered to the
firms, the financial firms on Wall Street, that would be
interesting?
Mr. Garcia-Diaz. The leadership of the firms have to put
pressure and incentives for managers to really take this
responsibility seriously and to heart. It is not a check-the-
box activity. It is a more substantial commitment that is
required.
And so that goes back to what I think is kind of the
fundamental part, which is making sure that middle managers in
the organization who are doing the interviews and the
recruitment are held accountable, that they are, in fact, doing
the best job they can to share information with potential
candidates and recruit them.
Chairwoman Waters. That is an interesting idea, incentives
to management who have the responsibility for hiring, and that
could be done in any number of ways and perhaps in their annual
reviews and some other kinds of things.
Mr. Garcia-Diaz. Yes. That is the kind of accountability
mechanisms that you can have, that it is part of their
performance review. Potentially, it is a consideration in pay
and bonus. And even just reporting requirements and being
subjected to scrutiny is another powerful tool.
Chairwoman Waters. Well, thank you so much.
And I yield back the balance of my time.
Chairwoman Beatty. Thank you.
The gentleman from Wisconsin, Mr. Steil, is recognized for
5 minutes.
Mr. Steil. Thank you.
Mr. Garcia-Diaz, thanks for coming today.
I want to follow up on the question that my colleague, Mr.
Gonzalez, had. As I looked at your report, I noticed that
diversity trends in the financial services industries are not
uniform across some of the subgroups. So, for instance, banks
and credit unions tended to be more diverse than, say,
insurance companies.
Do we observe any common features in more diverse
industries and companies? Or what leads one industry to have a
more diverse workforce than another, based on your research?
Mr. Garcia-Diaz. Yes. To speak to those specific trends, I
think is a little bit challenging, given the data that we have.
However, in doing the research, we did identify studies where
there are certain types of jobs in the financial industry that
may be perceived as being less welcoming of women, let's say.
So certain areas would be like trading in the securities
business and, in fact, you see that the securities
representation line is relatively low compared to other
sectors.
Mr. Steil. Less welcoming on the entry-level side, is that
what you mean by less welcoming, or less welcoming across-the-
board?
Mr. Garcia-Diaz. No, I am talking about at the management-
level side.
Mr. Steil. Management. Okay.
Mr. Garcia-Diaz. We heard from experts that there are
certain types of responsibilities and occupations that may be
perceived as being more male-dominated and less welcoming in
that sense.
And we also heard at least, and we can't tell this from the
data, but we heard that sometimes in the management figures
that we are looking at, it is unclear whether the minority
employee or the woman employee is working kind of in the
business-forward side of the business as opposed to, say,
accounting, human resources, and things like that.
So that is an interesting area, again, that if there were
data to explore that just because they are in the financial
services industry, just because they are in banking or
insurance, we don't really know what their occupation, the
specific occupation is that they are doing under that rubric.
Mr. Steil. Got it. Thank you.
I want to shift gears slightly over to the education side.
Education is a powerful tool that allows people to get that
first step up as they head towards a higher-level management
position in some of these industries.
I served on the University of Wisconsin Board of Regents
prior to coming to Congress and was proud of the fact that we
put in place policies to control the cost of education. So if a
student was going to UW-Madison and was from a family that made
less than $56,000 a year median income in the State of
Wisconsin, the tuition and fees of the University of Wisconsin-
Madison is free, it is covered. And so that gives individuals
an opportunity to get a step up.
You mentioned in your testimony that some of the financial
services firms surveyed told research they had broadened the
list of schools that they had gone to recruit from, from beyond
just a handful of maybe elite schools on the East Coast. Can
you share any information as to how successful those efforts
may have been?
Mr. Garcia-Diaz. Yes. Only sort of in terms of what we
heard from the folks that we interviewed.
Mr. Steil. Please.
Mr. Garcia-Diaz. And generally, they were positive about
those efforts in expanding beyond the normal circle of schools
that they recruit from. And in particular, it is stated as a
challenge when managers kind of focus on a few schools and
trying to get them to actually think more broadly and expand
beyond what they are accustomed to is one of the challenges
that some of the folks we interviewed cited.
And so while I can't speak to what is happening nationally,
but at least anecdotally, folks are reporting back that it is a
promising practice.
Mr. Steil. Thank you. That is helpful.
I yield back the balance of my time.
Chairwoman Beatty. Thank you.
The gentlewoman from Texas, Ms. Garcia, is now recognized
for 5 minutes.
Ms. Garcia of Texas. Thank you, Madam Chairwoman. And it
is, indeed, an honor for me to serve with you and try to tackle
some of the issues that are in front of us today.
Before I begin, I just wanted to say that I served as the
elected city controller in Houston from, oh, 1998 plus 5 years,
till 2003. And probably one of the most disheartening things
for me was dealing with the financial world, not because I
couldn't handle the work, but because of who I faced sometimes.
It seems like any meeting that I went to, whether it was to
negotiate a depository contract or a banking contract or select
investment bankers for a bond deal or anything that I did, it
really was still a man's world and it was also very White. I
still remember when they took me up to the floor when they were
trading with our first pricing. I didn't see anything but,
quite frankly, blond, blue-eyed men in white shirts and ties.
I am happy now that the last time I spoke to a public
finance group, it has changed a little bit. But we haven't
really quite done enough, it seems.
So what you said earlier today caught my ear, when you said
that diversity is interpreted differently in different areas.
Is there a way to get a better handle on what diversity
really is and set real goals and timetables for some of the
people in the financial services industry? Because it seems to
me that we are not even quite there yet. And it is more than
diversity, it is also inclusion and really a commitment to it.
So what else can we be doing in this arena?
Mr. Garcia-Diaz. I think that is the significant challenge
ahead of us, is what does it look like and then what do we need
to do to get there. And, as I mentioned before, there is really
no easy answer to that question.
But I think there are steps that firms can take to really
enhance their diversity management in their organization, but
first you have to commit to it, you have to see this as a
priority, and then do other things that we highlight in our
prior work, practices that help organizations achieve the kind
of diversity that they are hoping to achieve.
And what informs that, in terms of what does that diversity
look like, is really looking at who your customer base is,
where are you located, what does your community look like.
Ms. Garcia of Texas. Right. Because I have always thought
that the easy answer is that your workforce should look like
the people that you are serving.
Mr. Garcia-Diaz. That you are serving, yes.
Ms. Garcia of Texas. So that is easy enough. I just
sometimes get really baffled that they make it so hard.
I will move on to another question related to that. We have
focused on the services. Have you seen any studies or have you
all done any studies on them looking at the access to those
institutions?
Mr. Garcia-Diaz. Access by?
Ms. Garcia of Texas. By the customer, the consumer?
Mr. Garcia-Diaz. I don't have any information on that. I'm
sorry.
Ms. Garcia of Texas. You don't at all? It is just the
diversity and inclusion of the workforce in terms of the
studies you have done so far?
Mr. Garcia-Diaz. Yes, part of it. We have done--the agency
has done work in terms of looking at, in a very specific area,
looking at business activities and contracting with and
conducting business with minority organizations to support
minority- or women-owned businesses, if that is what you are
referring to.
Ms. Garcia of Texas. Right. So what service have you
actually done just on inclusion? You had diversity--you know,
coincidentally, I also was an EEOC hearings examiner, and they
tend to just look at the numbers, look at the percentages, and
look at the EEO profiles of the companies. But you can have
someone--again, I will use my experience when I was controller.
If a minority or a woman came in with the investment
banking team, it was usually the one who was carrying the
presentation books and was never really included on being part
of the presenters. They just carried the books.
And I used to sometimes just have to look at the person and
say, ``Well, you know, Mary Sue, you haven't said anything.
What do you think?'' I would have to ask to get them included.
So how do we really look at inclusion, making sure that
they are really part of the company, given training, given
opportunities to grow within that particular company?
Mr. Garcia-Diaz. That is the cultural shift that has to
happen. And one of the things we identify is the education and
training component to make people aware of the consequences of
the kind of behavior you described just now.
Ms. Garcia of Texas. Thank you.
Thank you, Madam Chairwoman.
Chairwoman Beatty. Thank you.
The gentleman from West Virginia, Mr. Mooney, is now
recognized for 5 minutes.
Mr. Mooney. Thank you, Madam Chairwoman.
So, Mr. Garcia-Diaz, thank you for coming and for providing
your expertise. I really appreciate it.
We can all agree that efforts to increase diversity can
always be improved, but it is important to point out that
diversity and inclusion are two different factors. That is why
this committee has two different names for that.
So in the Harvard Business Review study researchers have
found that diversity in the workforce will not succeed without
the inclusion factor. The study cited Verna Meyers, a noted
diversity advocate, who stated, ``Diversity is being invited to
the party; inclusion is being asked to dance.''
So, Mr. Garcia, inclusion is the driving force to make
lasting impacts on the diversity of a workforce. So if that is
the goal, what has the data shown are the most crucial factors
affecting inclusion?
Mr. Garcia-Diaz. Yes. And you are absolutely right, I think
a lot of the research does point to the importance of inclusion
as--diversity is not enough in a lot of ways, and that you do
need that inclusiveness to make sure that people are making
meaningful contributions in the firms that they work for.
In terms of the data, our data doesn't necessarily speak to
that, at least the data analysis that we did of EEOC
information that is reported by financial firms. And so it is
hard to kind of take the temperature, in a sense, of the firms
and to see to what degree they are embracing and incorporating
inclusion.
But in our conversations with experts, again, they
highlight that is a necessary condition to have a longstanding
and effective management of your diverse workforce, is the
inclusion part. And that can actually help with even the notion
of addressing kind of retention issues and making people feel
that they are part of the organization and they are willing to
stay there long enough so that they can rise in the
organization.
Mr. Mooney. Fair enough.
My next question has to do with the issue of government
regulation, rules, mandates, laws versus an industry or a
business on their own taking initiative for their corporation,
taking into account their unique circumstances to promote
diversity and inclusion.
Because sometimes I feel that the one-size-fits-all
government regulations may actually have an adverse effect.
When you try to apply it to every business the same way it may
actually have a counter-balancing effort as people worry about
the regulations and start making laws to that.
So apart from government efforts, what are some of the
organic solutions that the firms have come up with on their own
to address the diversity and inclusion challenges?
Mr. Garcia-Diaz. Again, when talking to experts in the
area, they repeatedly say there is no single solution that
works for everyone. And so there has to be flexibility, there
has to be innovation occurring. But in order to make that
effective, there has to be sufficient information-sharing.
Venues like this, the kind of work the subcommittee will do,
will contribute to that.
But whether it is Federal agencies, through their OMWI
offices, or the private sector and what they are doing, sharing
information about practices that have been effective in their
case and also reporting on any assessments that they have done
is critical to getting information out about the range of
options that are available to promote diversity and inclusion.
Mr. Mooney. And so the promoting diversity and inclusion
across multiple businesses, or is this more of a financial
services sector issue?
Mr. Garcia-Diaz. Well, it really does apply to everything.
It applies to us as Federal agencies. It applies to the
financial sector and other professional services organization.
Mr. Mooney. All right. I have a minute left here, but I
will try one more question.
The GAO report that you authored describes the need to
improve recruitment and retention. Those two factors will lead
to the most lasting solutions to the diversity and inclusion
problems. What did the data show to be the most effective and
proven solutions in those two categories?
Mr. Garcia-Diaz. As far as we can tell, it is hard to
pinpoint just one. Everything we have heard has emphasized the
multiplicity of action to address both the recruitment and the
retention question.
Mr. Mooney. Okay. Well, thank you for your time and
testimony.
And thank you, Madam Chairwoman, for having this hearing
today. I yield back the balance of my time.
Chairwoman Beatty. Thank you very much.
The gentleman from Missouri, Mr. Clay, the Chair of our
Housing, Community Development and Insurance Subcommittee, is
now recognized for 5 minutes.
Mr. Clay. Thank you, Chairwoman Beatty.
Let me say that, Madam Chairwoman and Ranking Member
Wagner, I appreciate you embarking on a new course by leading
this new Subcommittee on Diversity so that diversifying
America's workforce will no longer be mere lip service.
And as the Chairman of the Federal Reserve indicated in
this morning's Humphrey-Hawkins hearing, it is time to move
past the Rooney rule so that not just one minority candidate is
interviewed for the purpose of window dressing, and we will now
refer to that new rule as the ``Beatty-Wagner rule.''
America is made better by its rich diversity. Our
institutions of higher learning are enhanced when more voices
are included on campuses. Our religious institutions grow and
prosper when the congregations are not segregated. Our athletic
fields are more interesting when people from all walks of life
are able to participate together. And our apartment buildings,
neighborhoods, and co-ops are more comfortable to inhabit when
not everyone looks the same, speaks similarly, or has identical
neighbors on every floor.
Mr. Garcia-Diaz, let me ask you, during your research for
this report were you able to determine what percentages of
financial firms provided training on unconscious bias? And did
any firms note that some forms of training were found to be
more successful than others, such as in-person training versus
online training?
Mr. Garcia-Diaz. Yes, sir. We don't have any figures on the
frequency of the use of that kind of training to address
unconscious bias. In our interviews with industry
representatives and advocacy groups that was definitely one of
the tools to use and to address the issue of unconscious bias.
Training can't do it by itself, though, and it has to be in
culmination with other efforts. But, yes, that is--
Mr. Clay. But you and I will agree that that is one of the
major impediments, major barriers to diversifying workforces in
financial services, or in any other industry in this country.
Mr. Garcia-Diaz. Yes. That would be a significant concern,
and not just in the financial services industry but broadly
speaking.
Mr. Clay. But broadly, sure.
Mr. Garcia-Diaz. Yes.
Mr. Clay. And so can you offer any suggestions on how we
attack that?
Mr. Garcia-Diaz. I think just the question that you asked
of how frequently, how prevalent is this type of training, how
is this being used. And also the different varieties. As you
just pointed out, you can do it online, you can do it in
person, you can do it in different formats. And so having more
information, obtaining more information on the variety of
options for training and what seems to work more would be
something that is needed to really advance the ball.
Mr. Clay. And regarding retention, could you comment on
what workplace inclusion practices can improve companies'
minority and women retention rates?
Mr. Garcia-Diaz. Yes. And I will start off with one that I
think is very important. It is holding management accountable
for the organization's diversity goals, ensuring that their
work, their performance, and their ability to take these
matters seriously aligns with their leadership's own commitment
to diversity and inclusion.
Other kind of steps, practices that would be helpful for
retention includes employee engagement, obtaining a lot of
qualitative information about what their experiences are in the
firm that may not be reflected necessarily in just straight
numbers.
Mr. Clay. All right. And my time is up. Thank you, Madam
Chairwoman. I yield back.
Chairwoman Beatty. Thank you.
The gentleman from Texas, Mr. Gonzalez, is now recognized
for 5 minutes.
Mr. Gonzalez of Texas. Thank you.
And, thank you, Mr. Garcia-Diaz, for being here today.
I have a question. Has the GAO looked at promotions
separately from new hires? In other words, are we promoting
more minorities from within? And is the rate at which
minorities are promoted to management positions different from
the rate that minorities are hired into management?
Mr. Garcia-Diaz. Yes. And, unfortunately, one of the
limitations of the EEOC data is that it doesn't allow us to see
people's movement within the organization, like in the case of
promotion. We just see these balances, how many people in its
account.
But in the report, in our 2017 report, and in testimony, we
look at the potential pipelines that feed into these promotions
outside of the management level. And so we have statistics that
there is quite a bit of diversity in sort of professional jobs
that are non-management, sales jobs that potentially the firm
can draw from to promote into the higher management levels.
Mr. Gonzalez of Texas. So the answer is, we don't know.
Mr. Garcia-Diaz. We don't know.
Mr. Gonzalez of Texas. And finally, in my district, we have
about an 80 or 90 percent Hispanic population, but we still
struggle with inclusion in upper management for non-minority-
owned businesses. Can you advise if the GAO could get a better
handle on challenges faced in the hiring of a diverse workforce
if, for example, the data was looked at on a State-specific
scale or on a regional scale?
Mr. Garcia-Diaz. Yes. In our 2017 report we include some
statistics on the State level based on the EEOC data. But the
emphasis still falls on effective recruitment strategies that
firms should be adopting, again, looking broadly and doing
intentional recruiting of minorities, identifying the pool,
draw them in, so that they have the opportunity to be
interviewed, to be considered for the job.
At the end of the day, it is the talents and what you bring
to the table that will hopefully lead to a job. But they need
to first show up at the interview. And firms have to do an
effective job to draw those candidates in for consideration.
Mr. Gonzalez of Texas. Very well. I yield back the balance
of my time.
Chairwoman Beatty. Thank you.
The gentleman from Florida, Mr. Lawson, is now recognized
for 5 minutes.
Mr. Lawson. Thank you, Madam Chairwoman.
And, Mr. Garcia-Diaz, welcome to the committee.
I worked in the financial services area for 36 years, and
during my tenure there what I have found out is that in most
cases in the financial services industry when they do recruit
minorities into the area, oftentimes, which is not discussed,
is they don't really last, because they don't have the support
that is needed in the area because sometimes it is the new
entrances, whereas in the majority population, where some of
these individuals or students are exposed because of family
connection and the jobs that they have in college and so forth,
they have more of an appreciation on how it works and how they
can move through the system.
And my question would be, for example, I have Florida A&M
University, one of the Historically Black Colleges and
Universities (HBCUs), in my district that has a great school of
business and engineering. And do many of the companies, are
they still, from your knowledge, are they going around to
recruit at the universities a couple of times a year to make
sure that they can attract some of the students into the
financial industry to improve our diversity?
Mr. Garcia-Diaz. Yes. And I think one of the important
points is when you are drawing folks of different backgrounds,
different experiences, everyone relies to some extent on some
sort of mentoring. It may be family because they have been in
the business, so they know it. Others don't have that.
And so a forward-looking organization will be setting up
either mentorship programs or some sort of sponsorship program
for employees coming in to ensure that they understand how to
navigate through the organization, how to progress in your
career, and those are critical parts to addressing actually the
retention issue.
Sometimes it might be easy to get someone in the door, but
then to keep them is a whole different matter. And,
particularly, you want to set up folks for success. And so
programs, and they are out there and they exist, and we have
been told that they have been quite effective in assisting
folks in their career.
Mr. Lawson. Sometimes, when I am back in the district, I do
banking on Saturdays because it is open from 9 until 12. And in
the banking area, and this is, I am just going to say, this is
with Bank of America, what I have noticed is the trend has
been, because a lot of the Hispanic members, individuals go
into banking now, I have seen where they have increased the
number of Hispanic-speaking individuals in the banking industry
so they can deal with all of the customers who come in.
But over the last couple of years, when I have gone into
those institutions, I haven't been able to see whether there
has been an increase in minority, African-American
representatives like they have done on the Hispanic areas in
that financial institution. But I thought it was great what
they did for Hispanic because sometimes there is a language
barrier that some of the people can help with a little bit
more.
I have always viewed diversity as something that should be
a part of the American way of life, because the whole
population in America has been changing. In your dealings and
in the research that you have, how do you all approach these
institutions about trying to create more diversity in the
workforce?
Mr. Garcia-Diaz. I think one of the important components is
for, whether they are banks or securities or insurance
companies, whatever they are, is that they have
institutionalized kind of the thinking behind diversity and
inclusion in their operations and to do it consistently across
all levels, whether it is the entry level teller kind of jobs
in the bank, but thinking about how people can progress through
the organization all the way to the top.
And so we have identified some key practices that are
essential. I mentioned a few before, like leadership commitment
and accountability. But other things include data analysis,
knowing what the shape of your workforce looks like, where are
you losing candidates for potential promotion, what is their
composition and makeup. Those are critical parts for an
organization to become self-aware about how they stand, how
they are doing in terms of diversity and inclusion.
Mr. Lawson. Okay. Thank you. I yield back.
Chairwoman Beatty. Thank you.
The gentlewoman from Pennsylvania, Ms. Dean, is now
recognized for 5 minutes.
Ms. Dean. Thank you, Madam Chairwoman. And I thank you for
this hearing and the focus of the hearing.
And thank you, Mr. Garcia-Diaz, for being here and for
offering us your expertise and your guidance.
I, too, echo my colleagues' sentiments about diversity
being our strength. And it is not just a pretty sentiment. We
actually know that it works in industry, in the financial
services industry, and in all industries.
As we diversify, as the research shows that as we have
people of different ethnicities, gender, backgrounds,
experiences, geography, ethnicity, the enterprise does better
because they get better ideas.
I represent Montgomery County and Berks County in
Pennsylvania. I am a newly elected Member. I have to admit that
I have been so proud of the mentorship that senior Members have
offered us incoming freshmen, regardless of our age. And so I
want to talk to you about the idea of mentorship.
As I visit my area high schools, I want to talk about the
talent pool and making sure that that talent pool knows of the
opportunities, whether it is in financial services or other
industries. So I noticed, for example, in the GAO 2017 report,
one suggestion for overcoming recruiting challenges was to
offer programs to increase awareness of financial services.
So to follow along on the line of questioning you were just
having, could you describe in detail--and I am going to give
you specifics on the ground. Montgomery County is considered
the third most affluent county in Pennsylvania, but there are
pockets of great need, terrific resources and opportunity, but
educational unevenness, economic unevenness.
So I visit my Norristown area high school students. They
don't know all the opportunities in front of them. And this is
literally what we talked about. We need mentors in these
schools at the high-school level, if not even earlier.
Can you describe some of these relationship-building,
mentorship-building programs, how can I get them, tap into them
in the financial services industry in my Fourth Congressional
District? What does the curriculum look like? How are they
implemented?
And are there certain literally training programs for
students so they can come visit financial services
institutions? Can you give us some sense on how I can access it
for my students?
Mr. Garcia-Diaz. While we didn't look at specific types of
programs that are out there, there are a lot of groups that are
trying to generate these kinds of partnerships between, say, a
bank and a school or the large local employer with the schools
to reach out to students. And it is something just in our
conversations that we have had when we were doing the 2017
report.
We can certainly share names of certain organizations that
can kind of facilitate that and help thinking. They tend to
specialize more on those type of efforts than we do.
But that holds a lot of potential. And it is not only
important for firms to engage their own employees; it is also
important that they engage their community because that is
going to be their future workforce. And how do they bring them
in through the door, how do they make sure they are aware.
Because sometimes it is just: Is this a possibility for me?
Is this something that I could do? Conveying that clearly to
certainly young folks and going in school right now would be
very helpful. But we can get you some information on the types
of organizations that can help with those kind of partnerships.
Ms. Dean. And if you could provide that to the committee.
Mr. Garcia-Diaz. Oh, yes.
Ms. Dean. I think it would help across the country to know
about things like that.
Are there any best practices you can share, and/or are
there any, among those programs, are there any scholarship
opportunities? What can you say about those two ideas?
Mr. Garcia-Diaz. We can look into it and get back to you on
that. There are, I know, a lot of efforts, for instance, like
in the financial literacy area where financial institutions are
engaging schools and trying to incorporate financial literacy
in the curriculums and things like that, which, even though it
is not directly related to this, but it does get at the
partnerships that exist out there that can be leveraged to have
school-age children sort of recognize this as a possible career
path.
Ms. Dean. And I am going to ask a very broad question
really late in my time here and probably it has been discussed.
But what is the secret to, not out to maybe the talent pool,
but at the retention and hiring time and promotion, what is the
secret to changing the trends that we see?
Mr. Garcia-Diaz. I think the secret, if there is one, but I
am going to venture a guess here--
Ms. Dean. Unleash the secret, yes.
Mr. Garcia-Diaz. --is really that it has to be intentional,
it has to be strategic, and it has to be sustained. If you
don't have it, if you don't do that, it will fall apart.
Ms. Dean. Thank you.
Thank you, Madam Chairwoman.
Chairwoman Beatty. Thank you.
I would like to thank our witness, Mr. Garcia-Diaz, for
your testimony today.
The Chair notes that some Members may have additional
questions for this witness, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to this witness and to place his responses in the record. Also,
without objection, Members will have 5 legislative days to
submit extraneous materials to the Chair for inclusion in the
record.
This hearing is adjourned.
[Whereupon, at 4:42 p.m., the hearing was adjourned.]
A P P E N D I X
February 27, 2019
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